Financial management is an important aspect of an individual’s day-to-day life. Making informed choices means that you will have a smoother life in terms of your lifestyle and it also means that you will be less stressed about money. Many who have been reckless with their finances have ended up depressed. Here is the link between poor money management and depression.
Some people have become depressed because of their inability to manage finances. People have taken their lives or descended into deep depression just because things went terribly wrong with their finances. One of the issues is poor planning or management. Here are some of the lessons one needs to learn in order to manage money.
- The need to budget
It is important to develop a budget on the things you must have and have a clear list of where your money will go. You can have a list of things that are a ‘must-have,’ followed by the ‘not-so-important,’ and on and on. If it is electricity, water, food and entertainment for the household, make sure that the cost is well outlined and make sure that you ask the critical questions whenever the cost goes well beyond what you projected.
A clear budget will save you a lot of headache when at the end of the month or at the beginning when you cannot trace how you spent your money. Lack of a clear budget will lead you to enormous losses and before you realize it, big chunks of your income will be spent on very petty things. It is only when these things hit you hard and things start crumbling that you will learn why budgeting is important. Just do it early and save yourself the headache, and the shame. Lifestyle: How To Live Your Best Life On A Budget
- Equalizing credit ratings
One of the adverse effects of poor financial management is the risk to your credit ratings. Impulse spending will no doubt lead to borrowing when emergencies arise because you will not have adequate cash or you will be totally unprepared. You will borrow and it is very much likely that you will be unable to repay the loan in time. This will lower your credit ratings and you will not be able to borrow.
Borrowing is not bad as loans can be very helpful if planned for well. Having a low credit rating essentially means you will be denied any form of loans by lenders and you will find it quite hard pulling yourself out of tricky situations. It is only then that you will learn the importance of having a credible credit score. Is this the way you want to go? I bet not. Finances: How To Check Your CRB Status In Kenya
- The need to meet financial obligations on time
Let’s take the example of your daughter or son in high school being sent home because you cannot pay that fees in time or your landlord throwing you off his premises because you ‘can’t pay the rent.’ Heartbreaking right? Well, all these instances stem mostly from the fact that you are a poor financial manager. If you keep postponing your financial obligations, for whatever reason, they will bounce back at you with force. It is only then that you will appreciate the need to settle your financial obligations on time.
- The need to save
Having a savings account is beneficial in more ways than you can imagine. You cannot survive without some form of financial backup. Normally, unplanned expenses come up. These may come in the shape of medical emergencies or the need to pull your loved one out of some trouble- it is not always about you. If you cannot plan adequately on how to spend your finances, you will not bother saving. The problem is emergencies pounce at the most inopportune time. You do not need to stay in your comfort zone and wait for this. Do you? Want to be wealthy? Investment tips 101
- The need to use credit sensibly
One of the disadvantages associated with money that you have not worked for is that most people always feel the need to spend it impulsively. It is only after the credit cash is over that reality hits you hard as you try to figure out what sensible project you used it on. It is during this period that you begin imagining how well or how better you could have utilized the cash. You need to know how to use credit wisely and not learn to do it the hard way.
- The need for loan consolidation
Poor financial management will confide you to borrowing from multiple lenders. The problem with this is that the danger of having your credit rating badly denatured is very high. This can easily be dealt with by simply consolidating your loans to one lender. In this sense, you only have to worry about one lender and not struggling to meet multiple deadlines because you have borrowed from more than ten lenders. With sound financial management, you will know the importance of borrowing from one source rather than having to learn it when things go bad.
7. The need to plan purchases and avoid impulse buying
Another common characteristic of people who cannot manage finances is that they tend to do a lot of impulse buying. Just because you have money, doesn’t mean that you should just spend money anyhow. Learn to plan your finances well.